2020 COVID Crash Lessons

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ImmigrantSaver
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Re: 2020 COVID Crash Lessons

Post by ImmigrantSaver »

mrspock wrote: Sat Mar 21, 2020 11:23 am
tealeaves wrote: Sat Mar 21, 2020 11:14 am
ImmigrantSaver wrote: Sat Mar 21, 2020 7:38 am
louiethelilac wrote: Sat Mar 21, 2020 4:45 am I have learned that my tolerance for stock fund declines is much higher than for bond fund declines.
Same for me. I agonized about losing a couple thousand in Muni holdings way more than losing over 100k in stocks. Makes no logical sense to me!
I think the feeling of agony makes perfect sense if you believe the "bonds are for safety" mantra (as so many do). Far more unnerving to experience declines in magnitude that you never expected for your "safe money". But if you hold on it's also logical to anticipate a rebound within a tolerable time period.
What bothers me is that as rebalancing bands his, my IPS says to rebalance. I have no choice but to sell these bonds at a loss to do so. This was not part of the scenario I had imagined in my head. I'll have to run the math still, but I really wonder if holding a rebalancing band worth of intermediate treasuries would have been the better move in hindsight. I suspect the tax drag might be greater than my bond losses right now, which would make me feel better (as I did the right thing to begin with), but I sure am curious.
Fortunately I don't need to use my muni fund to rebalance as it's the money for downpayment rather than retirement (mental accounting I know :? )
But if I had to, I would think about it this way: I am selling something that is down 2% and buying something that is down 10%, which means I am making 8% when things recover. At least that's how I am thinking about rebalancing from US to international :oops:
ImmigrantSaver
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Re: 2020 COVID Crash Lessons

Post by ImmigrantSaver »

Bluce wrote: Sat Mar 21, 2020 9:10 am
ImmigrantSaver wrote: Sat Mar 21, 2020 7:38 am
louiethelilac wrote: Sat Mar 21, 2020 4:45 am I have learned that my tolerance for stock fund declines is much higher than for bond fund declines.
Same for me. I agonized about losing a couple thousand in Muni holdings way more than losing over 100k in stocks. Makes no logical sense to me!
Stop checking your PF value!

Take a look in, say, September.
I know you are right! It's mostly for rebalancing I look
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Spinola
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Re: 2020 COVID Crash Lessons

Post by Spinola »

EFF_fan81 wrote: Sat Mar 21, 2020 11:43 amif you turn the ship back to port every time there are storm clouds on the horizon, will you ever reach your destination?
True. :beer
"If more of us valued food and cheer and song above hoarded gold, it would be a merrier world." | Thorin Oakenshield
Reefguy
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Joined: Sat Mar 21, 2020 12:17 pm

Re: 2020 COVID Crash Lessons

Post by Reefguy »

Asset allocation works....until it doesn’t:

https://realmoney.thestreet.com/investi ... n-15271581
Dandy
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Re: 2020 COVID Crash Lessons

Post by Dandy »

I'm a moderate to conservative investor and feel it is surprising how a long bull market tends to dull the risk. You know it but you don't really feel it because it has been so good for so long.
ValuationsMatter
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Re: 2020 COVID Crash Lessons

Post by ValuationsMatter »

Valuations Matter!
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topper1296
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Re: 2020 COVID Crash Lessons

Post by topper1296 »

Don't think there is any new here that someone else didn't bring up, but here are mine.

1- Prefer mutual funds over ETFs, but will continue to use some ETF's.
2- Have my age x 60% for my bond allocation. Will bump that to age x 80%. Yes, I know bonds are expensive right now and will gradually increase using my regular 401K contributions.
3- Total bond index is my core bond holding, but will tilt more to intermediate term treasuries.
4- Cash is king. Will also explore utilizing CD's as part of my cash component.
5- Paying off my mortgage early is sounding more and more attractive as a low risk, tax free return.
6- Will lower my allocation to international stocks and REITS by 5% each. have to reduce somewhere if going to increase my bond exposure
7- Not very BH'ish, but was happy with my individual stock holdings. They held up better than the market as a whole.
APX32
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Re: 2020 COVID Crash Lessons

Post by APX32 »

1. I overestimated my risk tolerance. Even a very conservative 50-50 allocation (just turned 44, about 10 years from planned retirement) was not conservative enough. Watching $80k vanish in 2 weeks was too much. Adjustments have been made and they will not change much when things eventually settle down, I’m mostly done with stocks.

2. I have newfound respect for cash. That’s perhaps the biggest lesson for me. When there’s indiscriminate selling going on, there’s no safety in bonds, LTTs, gold, bitcoin, everyone is in a mad cash towards the safety of cash. I will now focus on building and maintaining a large cash position (minimum 5 years expenses) going forward.

3. I will make every effort to pay off my mortgage within the next 5 years. What a piece of mind that will be when the next pandemic/crisis hits, and hit it will, sooner than expected.

4. Take advantage of extreme volatility and market moves. I’ve done it a few times during this madness and made some coin in the low 5-figures which helped mitigate the losses, but I could’ve done better.
40% SPY | 10% stonks | 50% Cash
Boglacious
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Joined: Sat Sep 07, 2019 1:58 pm

Re: 2020 COVID Crash Lessons

Post by Boglacious »

Okay, fellow esteemed Bogleheads: Dr. Fauci today warned that another variant, worse than Delta and able to evade the vaccines, may be on its way:

Article here: https://www.axios.com/fauci-delta-varia ... deaba.html

Consider this post as a gentle reminder to take any steps now to prepare for what may be coming down the pike.

I don't know if I have the same risk tolerance again....may need to revisit asset allocation. :-D
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Bluce
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Re: 2020 COVID Crash Lessons

Post by Bluce »

APX32 wrote: Wed Mar 25, 2020 2:17 am 1. I overestimated my risk tolerance. Even a very conservative 50-50 allocation (just turned 44, about 10 years from planned retirement) was not conservative enough. Watching $80k vanish in 2 weeks was too much. Adjustments have been made and they will not change much when things eventually settle down, I’m mostly done with stocks.

2. I have newfound respect for cash. That’s perhaps the biggest lesson for me. When there’s indiscriminate selling going on, there’s no safety in bonds, LTTs, gold, bitcoin, everyone is in a mad cash towards the safety of cash. I will now focus on building and maintaining a large cash position (minimum 5 years expenses) going forward.

3. I will make every effort to pay off my mortgage within the next 5 years. What a piece of mind that will be when the next pandemic/crisis hits, and hit it will, sooner than expected.

4. Take advantage of extreme volatility and market moves. I’ve done it a few times during this madness and made some coin in the low 5-figures which helped mitigate the losses, but I could’ve done better.
Just don't check your portfolio value during big downturns. If you don't sell, then you still own all the assets and that's what matters -- more so than the market value of them at any particular point in history.

You need stocks for growth unless you already have enough to retire on. At 44, I was 100% in stocks.

At any rate, that's how I see the world of long-term investing.
"There are no new ideas, only forgotten ones." -- Amity Shlaes
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dogagility
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Re: 2020 COVID Crash Lessons

Post by dogagility »

Boglacious wrote: Wed Aug 04, 2021 8:07 pm Consider this post as a gentle reminder to take any steps now to prepare for what may be coming down the pike.
Nate Silver put it best with this sarcastic tweet: "Already worrying about the Omicron Variant which doesn't exist yet just to stay ahead of the curve." :wink:
Make sure you check out my list of certifications. The list is short, and there aren't any. - Eric 0. from SMA
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oldcomputerguy
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Re: 2020 COVID Crash Lessons

Post by oldcomputerguy »

The discussion is starting to trend into a conversation about the virus itself. See Please read before posting on coronavirus/COVID-19:
All posts that reference the coronavirus/COVID-19/pandemic must comply with all of our standard forum policies.

Likewise, posts on the Investing - Theory, News & General subforum must be entirely on the topic of investing. Posts primarily about general economic fallout from the pandemic or economic or monetary policy do not meet this requirement.
Please bring the discussion back to the original topic (lessons learned from the crash). Thanks.
There is only one success - to be able to spend your life in your own way. (Christopher Morley)
valleyrock
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Re: 2020 COVID Crash Lessons

Post by valleyrock »

At the start of the pandemic, vaccine maker stocks went through the roof. Novavax was one that I think still has never brought a product to market. Inovio is another one that ...er... shot way up. Now, we see Moderna jumping up yesterday and Pfizer up significantly, as well. The lesson learned? If you're going to jump in with some money set aside for gambling on individual stocks in response to current events, do it quickly.
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